Office Vacancy Rate in U.S. Climbs to 17-Year High as Jobs Recovery Slows
Office buildings stand in New York. Photographer: Daniel Acker/Bloomberg
Office vacancies in the U.S. rose to the highest level since 1993 in the second quarter as the sluggish economic recovery damps demand from corporate tenants, Reis Inc. said in a report.
The vacancy rate climbed to 17.4 percent from 16 percent a year earlier and 17.3 percent in the first quarter, the New York-based research company said today in a statement. Effective rents, the amount tenants actually pay landlords, fell 5.7 percent from a year earlier and 0.9 percent from the previous three months, according to Reis.
Private employers made fewer hires in June than economists had forecast, reinforcing concerns the recovery will weaken, the Labor Department said July 2. The report capped a month of data signaling weakness in housing and a slowdown in manufacturing. Including government, payrolls fell for the first time this year because of a drop in federal census workers. The jobless rate declined to 9.5 percent from 9.7 percent in May as the labor force shrank.
“Although occupancy continues to deteriorate, the rate of decline has clearly slowed,” said Ryan Severino, economist at Reis, in the firm’s report. Rents may turn positive later this year if the economy stabilizes, he said.
A total of 7.7 million square feet (715,000 square meters) of office space was completed last quarter, one of the lowest addition levels since Reis began publishing quarterly data in 1999, the firm said.
Office vacancies increased in 49 of 82 cities tracked by Reis, while effective rents fell in 60 markets. The growing number of cities with declining rents reflects concessions granted by landlords, Reis said.
Washington, D.C., remained the city with the lowest office vacancy rate, at 10 percent, according to the firm. New York vacancies stayed at 11.7 percent. Detroit had the highest vacancy rate, at 26.3 percent, amid declining employment in the auto industry, Reis said.
To contact the reporter on this story: Hui-yong Yu in Seattle at hyu@bloomberg.net
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